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How to Calculate Market Share: Formula and Example
In the dynamic world of business, a seller’s success depends on being able to stand out from competitors and gain a strategic position in the market. This necessitates studying one’s competitors, which can help sellers formulate their pricing strategies, adapt offers for market trends, and discover new opportunities.
Accurate assessment requires monitoring changes in demand, achieved through analyzing your competitors' sales data and market share. In this article, we'll not only explore what competitors' market share means and how to calculate it, but also discuss why it serves as a critical metric for business performance.
What is Market Share?
Market share, by definition, represents the percentage of total sales or revenue that a company or product holds within a specific market or industry. This metric serves as a key indicator of competitiveness and market dominance. In the realm of ecommerce, this concept is often applied with regard to large brands.
For example, in the USA from March 2023 to 2024, Apple captured 59% of total sales in the smartphone market, while Samsung had a 23% share. In contrast, in South Korea, Samsung dominated with a 66% share, leaving only 29% of smartphone sales for Apple.
Why Should You Monitor the Market Share of Your Competitors?
Assessing your competitors' market share is crucial for:
Assessing your competitors' market share is crucial for:
- Identifying opportunities: As the research example above shows, market shares for the same company can differ in various regions or over time. This discrepancy helps sellers find new opportunities to increase revenue.
- Competitor analysis: A higher market share often indicates strong performance compared to competitors, while a declining share may signal that you need to improve your strategy.
- Strategic planning: Understanding competitors' market share guides sellers’ decisions in terms of pricing, marketing, and product development.
- Investor insight: Market share influences investor perception and potential business sale valuation, which are crucial for assessing investment opportunities.
Monitoring competitors' market share offers insights into your competitive landscape, aiding you in strategic decision-making and uncovering growth opportunities. Below, you’ll find a formula for calculating market share.
Market Share Formula
Market share can be measured using the following formula:
Market share = (company metric/market metric) x 100
This metric is typically based on sales or revenue.
For instance, if a company sells 500 smartphones/month in a market where a total of 2,000 units are sold within a month, its market share in sales would be (500/2,000) x 100 = 25%.
However, applying this formula to your competitors requires a more targeted approach, as not all of this data is always accessible. Below, we'll explore how to adapt this calculation for competing in ecommerce.
For instance, if a company sells 500 smartphones/month in a market where a total of 2,000 units are sold within a month, its market share in sales would be (500/2,000) x 100 = 25%.
However, applying this formula to your competitors requires a more targeted approach, as not all of this data is always accessible. Below, we'll explore how to adapt this calculation for competing in ecommerce.
Analyzing Market Share on Amazon
As an example of how to calculate your competitors' market share for an ecommerce business, we'll use Amazon. Amazon stands out as a leader, with a database that includes over 300 million products and continuing growth. For new sellers, it's essential to evaluate the competition before entering the market in order to make strategic decisions for product differentiation and effective marketing strategies.
Here's a brief guide on how to calculate market share on Amazon:
Here's a brief guide on how to calculate market share on Amazon:
1. Check the market data. Find out the total sales and total revenue in the category. Unfortunately, Amazon doesn't share thistle of data, so you might want to consider using special sales analytics tools.
2. Check your competitors' data. Determine the sales numbers and revenue for each competing brand.
3. Calculate the market share. Apply the following formulas:
2. Check your competitors' data. Determine the sales numbers and revenue for each competing brand.
3. Calculate the market share. Apply the following formulas:
- Market Share Revenue = (company revenue/total revenue) x 100
- Market Share Sales = (company sales/total sales) x 100
Collecting precise data manually can be quite challenging. To get accurate data without spending excessive time on research, consider using special services that provide analysis and calculations of your competitors' market share and performance.
Conclusion
Understanding market share is undeniably important, but it can be easy to get lost in numbers and calculations. It's also not always possible to find the necessary information manually. This is why leveraging automated solutions like Sellerhook can provide precise market share reports, saving you time and allowing you to gain increased revenue for your business.
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